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LBO of Alarm Services. Balancing Risk and Reward. Nicolas Lindstrom Samuel Nadeau Franco Perugini. Mandate. North Village Capital purchase of AlarmServce Inc . Debt Structure. Strategic Fit. Return. Recommendation.
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LBO of Alarm Services Balancing Risk and Reward Nicolas Lindstrom Samuel Nadeau FrancoPerugini
Mandate North Village Capital purchase of AlarmServce Inc. Debt Structure Strategic Fit Return
Recommendation Complete LBO of AlarmServe, utilizing 2.5x Debt/EBITDA at entry to realize a 25% IRR
Mandate Industry is a good fit for an LBO
How NVC can add Value Expand to new geographic areas Focus on higher-margin accounts $2 Million Dollars by year 4 Reduce operating cost Eliminate cost of being public NVC can add value to the company through their involvement
Decision of debt Level Default risk is the deal-breaker
Decision of debt Level Medium leverage is the best option
How NVC can add Value Stable industry for LBO NVC can add $2 Value AlermServe is a good strategic investment investment for NVC Medium leverage is the best leverage level
Income Statement Margin expansion provided by synergies and operating leverage
Working Capital Working Capital will require cash from the business
Deal Structure Moderate debt levels to minimize risk
Cash Flow Debt repayment will be the major cash drain
Return Profile 25% IRR with a 3x multiple on money
Weak 2010 Return Check -5% Revenue growth in ‘10 leads to 19% IRR
Return Sensitivity Exit EBITDA and Exit Multiple IRR Sensitivity Multiple contraction will still provide sufficient returns
Acquisition Timeline Focus of due diligence will be on empolyee retention
Debt 2.5x Total Leverage
Leverage and Covenants All covenants are very comfortably respected
Management Strategies New strategies will increase CF to pay down debt
Management fees Management fees will add to returns
Exit strategies decision matrix Returns will be the deal maker
Sale Timeline A strong CIM will be crucial to strong exit valuation